Steve Case and his Revolution LLC fund for startups will gross about US$96-million in the sale of car-sharing service Zipcar Inc. to Avis Budget Group Inc., a deal that validated his early backing in the industry.

Case, the co-founder of America Online Inc., invested in car sharing in the mid-2000s, when the business model was still untested. By August 2012, his fund was the largest shareholder in Cambridge, Massachusetts-based Zipcar, which rents cars by the hour or the day in cities and on college campuses.

The success with Zipcar reinforces Revolution’s stated goal of investing in startups designed to disrupt established business. The Zipcar exit will be among the largest for the fund, created in 2005, said a person familiar with Revolution’s finances who wasn’t authorized to talk publicly about them.

Zipcar’s board agreed to a bid of US$12.25 a share, or about US$491-million, Parsippany, New Jersey-based Avis Budget said today in a statement. The offer, which has been accepted by holders of 32% of Zipcar’s shares, is 49% higher than Zipcar’s Dec. 31 closing price.

Case’s Revolution Living LLC had a 16% stake as of Aug. 28, according to data compiled by Bloomberg. Case, a board member, also personally owns 1 million shares, the data show.

Early Investment

After leading AOL’s acquisition of Time Warner Inc. for US$124-billion in 2001, Case stepped down as chairman of the combined company in 2003. The board voted to drop AOL from the company’s name in September that year, reflecting investors’ disappointment in the slumping shares.

Case, 54, formed Revolution in 2005 as a US$500-million fund to invest in health care, wellness and other companies. Flexcar, a car-sharing startup, was one of his first forays in August 2005. Case said at the time he got interested in Flexcar while walking past one of its parking spots at 17th and O streets, near Revolution’s offices in Washington. He used the service several times to reach meetings around the city. Zipcar bought Flexcar in 2007.

Revolution now has investments in about 30 companies. They include daily deal website LivingSocial Inc.; exercise tracking venture RunKeeper; HelloWallet, an online service helping employees manage their expenses; and SparkPeople, a website helping people reach their fitness goals.

Last year, Revolution cleared about US$100-million in the sale of Medicare exchange company Extend Health Inc. to Towers Watson & Co, the person familiar said. In the largest exit, American Express Co. bought money-card company Revolution Money in 2010 for about US$300-million. The fund owned just under 50% of Revolution Money, according to the person. Another Revolution startup, Lime Media, was merged with health lifestyle company Gaiam Inc. in 2007. Financial terms for weren’t disclosed.

Zipcar IPO

Zipcar sold shares in an initial public offering at US$18 each in April 2011. After initial gains, the stock had been trading under its IPO price for the past year. Demand for car- sharing, however, continued to surge, prompting Enterprise Holdings Inc. and Hertz Global Holdings Inc., the two largest U.S. car-rental companies, to offer such services to customers. Zipcar’s acquisition by Avis Budget, the No. 3, signals a shift in the industry to embrace drivers who don’t want to own cars.

Case, who co-founded AOL in 1985, also chairs efforts on entrepreneurship for President Barack Obama’s Council on Jobs and Competitiveness. Case didn’t respond to an e-mail and phone call seeking comment.